Encore Capital Group (ECPG) Q4 2024 earnings summary

Executive summary

• Achieved record global portfolio purchases of $1.35 billion in 2024, up 26% year-over-year, with 74% allocated to the U.S. and U.S. purchases up 23%, Europe up 36%.

• Collections grew 16% to $2.16 billion, with U.S. collections up 20% and Cabot (Europe) up 8%.

• U.S. business (MCM) drove growth, while Cabot underwent significant restructuring, including market exits and ERC reductions, resulting in a net loss of $139 million for the year due to non-cash charges.

• Leverage ratio declined from 2.9x to 2.6x, nearing the midpoint of the target range, despite record purchasing.

• Plan to resume share repurchases in 2025, prioritizing them above strategic M&A.

Financial highlights

• Q4 2024 collections rose 21% year-over-year to $555 million; full-year collections up 16% to $2.16 billion.

• Q4 2024 portfolio purchases surged 69% to $495 million; full-year portfolio purchases up 26% to $1.35 billion.

• Cabot's collections rose 8% to $588 million; portfolio purchases increased 36% to $353 million, driven by a $200 million Q4 deployment.

• Q4 and full-year results were impacted by non-cash charges: $129 million in negative changes to expected recoveries, $19 million IT asset impairment, and $101 million goodwill impairment at Cabot.

• Adjusted EBITDA for 2024 was $333 million, with a margin of approximately 25%.

Outlook and guidance

• Expect global portfolio purchases in 2025 to exceed 2024's $1.35 billion.

• Project global collections to grow 11% to $2.4 billion in 2025.

• Plan to resume share repurchases in 2025 as leverage approaches target midpoint.

• Interest expense expected to rise to ~$285 million; effective tax rate anticipated in the mid-20% range.